Shares in Shanghai fell yesterday, as Shanghai Pudong Development Bank Co was reported to have obtained approval from the regulator to issue additional shares, sparking fears of tight liquidity again.

The Shanghai Composite Index, which groups both yuan-denominated A shares and hard-currency B shares, dropped 1.31 percent to 1,184.19. The A-share Index lost 1.32 percent to 1,242.03, while the B-share Index trimmed 0.61 percent to close at 79.11.

"Just as the news that Baoshan Iron and Steel Co was poised to sell additional shares this week was being digested by the market, the bank's shares float announcement followed," analyst Lu Zhenjin with Xiamen Xindingsheng Securities Investment Consulting Co said in his daily research note.

"The concerns of a likely liquidity drain brought by big-cap companies' share sales continue to cloud the market."

The issue review committee of the China Securities Regulatory Commission has approved the bank's application to sell shares in a rights offering, Shanghai Securities News said, citing an unnamed source.

Shanghai-listed Pudong Development is going to float up to 700 million yuan-denominated additional shares. The lender's stock dived 4.16 percent to finish at 6.91 yuan (83.2 US cents).

Shanghai Daily